Leasehold houses and ground rents– reform on the way?

Christmas is an odd time to announce new measures on leasehold reform and you may be forgiven for not noticing these.  However, on 21 December 2017 the Rt.Hon. Sajid Javid MP and the Ministry of Housing, Communities and Local Government did just that.

The new measures are designed to remove “unfair and abusive” practices within the current leasehold system.   These include a ban on leaseholds for all new houses (but not flats).

Pundits have frequently condemned the “broken” housing market in most of the UK and the measures are the government’s attempt to provide a fix, aimed at delivering what will be, in their view, a fairer and more transparent system for the country’s estimated 4.2 million leaseholders.

Following on from recent consultations, the proposed measures include:-

• preventing the sale of new build leasehold houses, except where necessary, such as shared ownership
• ensuring that ground rents on new long leases – for both houses and flats – are set at zero
• working with the Law Commission to help existing leaseholders and make the process of extending a lease or purchasing a freehold much easier, faster and cheaper
• providing leaseholders with clear support on the various options available to them for redress

This is combined with a wider internal review of the support and advice to leaseholders to make sure it is “fit for purpose”.

From a solicitor’s standpoint, we often see situations in our day to day work which can lead to unacceptable delay or costs for leaseholders.   The situation of onerous ground rents – such as those doubling every 10 years – has already been highlighted by lenders.  Such terms were commonplace at the height of the housing boom in the mid-2000s.  And in addition to ground rent, there are also other unjustifiable charges – for providing notices on change of ownership and mortgaging, obtaining management information for a sale, approving a deed of covenant and providing certificates.   These charges can amount to several hundred pounds for the seller and buyer.

So when can we expect things to change?

This will depend on Parliamentary time being available.  Therefore, no date is set yet although it is understood the government is aiming for a date by the end of 2018.  Also expect the devil to be in the detail, as matters are worked through in greater detail.  Whilst the practices have been described as “feudal”, some may regard this as being a sound-bite rather than a true observation of the market.  For example, there are large modern developments which combine commercial premises, flats and houses – if they are properly designed then the leases create a proper structure for management of these developments.

Therefore, expect there to be detailed and persuasive representations by trade bodies acting for consumers, the lawyers and the landlords.  However, the government does seem to have this particular area in its sights and, subject to Parliamentary time and other diversions such as Brexit, we could well find that 2019 heralds some overdue and welcome changes.

Anthony Gold’s conveyancing and housing litigation team handles a wide range of leasehold work including sales, purchases, lease extensions, Right to Manage applications and freehold acquisitions as well as disputes with and disrepair claims against landlords.